Wesdome Announces 2020 Second Quarter Financial Results

Wesdome Gold Mines Ltd. (TSX: WDO) announces second quarter financial results. All figures are stated in Canadian dollars unless otherwise noted.

Mr. Duncan Middlemiss, President and CEO commented, “During Q2, Wesdome generated operating cash flow of $30.2 million or $0.22 per share and free cash flow of $17.7 million, net of an investment of $6.0 million in Kiena, or $0.13 per share, ending the quarter with a cash position of $66.7 million (Q1 2020: $49.4 million). Cash costs for the quarter were $882 per ounce (US: $637) and All-in sustaining costs were $1,218 per ounce (US $879) a 21% and 14% decrease respectively over Q1 2020.

With H1 2020 total gold production of 50,264 ounces at an average grade of 15.8 grams per tonne at the Eagle River mine, the Company is well-positioned to achieve its full year guidance range of 90,000 – 100,000 ounces at an average grade of 15 – 16.7 grams per tonne. H1 2020 cash costs of $1,009 per ounce (US$739) are above the high end of the company’s guidance range of $875 per ounce (US$670) due to inventory adjustments in the first quarter, and reduced operational efficiencies related to protocols implemented due to COVID-19. The Company is revising cash cost guidance for the year to $950 – $975 per ounce (US$700 – $720). H1 2020 All-in sustaining costs of $1,327 per ounce (US$972) are within the company’s guidance range of $1,280 – $1,350 per ounce (US $985 – $1,040) and we expect full year costs to be within this range.

The Eagle River complex was operating on reduced operations, and some work, such as exploration, mine and tailing construction activities, that were suspended in order to facilitate enhanced physical distancing to limit the potential spread of the COVID-19 virus, have gradually restarted in the second quarter. The initial budget for Eagle River underground exploration was 119,000 metres, which will now be 85,000 metres. Surface exploration metres of 33,500 metres will be largely unchanged, and we will introduce some regional exploration campaigns away from the existing mine.

At Kiena, work was shut down on March 24 in response to the Government of Quebec’s mandated closures due to the COVID-19 virus, and resumed on May 11. Drilling activities are back to 100% capacity, and we expect to achieve our previously guided drill metres of 80,000 metres. We expect to publish an updated resource estimate in Q4, followed by a Pre-feasibility study. During the quarter, we also completed our Preliminary Economic Analysis which delivered favourable economics of an after-tax IRR of 102%. A summary of the PEA was released on May 27, and the full report filed on June 25. Both reports are available on the Company’s website and on sedar.com.

Additionally, the Company wishes to announce the appointment of Raj Gill to the position of Vice President, Corporate Development. Raj has over 11 years of experience in the mining industry and capital markets including equity research, and most recently Director of Corporate Development at Kinross where he led and supported a range of strategic, financial and technical initiatives. Raj will be a great asset as Wesdome continues on its trajectory of becoming an all-Canadian intermediate gold producer.”

Key operating and financial highlights of the Q2 2020 results include:

Gold production of 25,142 ounces from the Eagle River Complex, a 12.1% increase over the same period in the previous year (Q2 2019: 22,437 ounces):
— Eagle River Underground 42,349 tonnes at a head grade of 18.1 grams per tonne (“g/t Au”) for 24,117 ounces produced, 15.5% increase over the previous year (Q2 2019: 20,873 ounces).
— Mishi Open Pit 13,721 tonnes at a head grade of 2.9 g/t Au for 1,026 ounces produced (Q2 2019: 1,564 ounces).
Revenue of $54.8 million, a 29.6% increase over Q2 2019 (Q2 2019: $42.3 million).
Ounces sold 23,140 at an average sales price of $2,365/oz (Q2 2019: 24,113 ounces at an average price of $1,752/oz).
Earned mine profit¹ of $34.3 million, a 55% increase over Q2 2019 (Q2 2019 – $22.1 million).
Cash costs¹ of $882 (US$637) per ounce of gold sold (Q2 2019 of $837 (US$626) due to higher tonnes processed at the mill.
All-in sustaining costs (“AISC”) ¹ of $1,218/oz or US$879/oz, a slight decrease over the same period in 2019 (Q2 2019: $1,220/oz or US$912/oz), due to lower sustaining capital expenditures; partially offset by lower grades and higher tonnage processed at the Mill.
Operating cash flow of $30.2 million or $0.22 per share¹as compared to $15.4 million or $0.11 per share for the same period in 2019.
Free cash flow of $17.7 million, net of an investment of $6.0 million in Kiena, or $0.13 per share¹ (Q2 2019: free cash flow of $1.2 million or $0.01 per share.
Net income of $16.1 million or $0.12 per share (Q2 2019: $8.3 million or $0.06 per share) and Net income (adjusted)¹ of $16.4 million or $0.12 per share (Q2 2019: $8.3 million or $0.06 per share).
Cash position increased to $66.7 million compared to $49.4 million in the previous quarter.

¹ Refer to the Company’s 2020 Second Quarter Management Discussion and Analysis, section entitled “Non-IFRS Performance Measures” for the reconciliation of these non-IFRS measurements to the financial statements.


Production and Exploration Highlights	Achievements
Eagle River	With normal operations curtailed due to the COVID-19 pandemic, surface and exploration drilling is currently operating at a reduced capacity. However, recent underground drilling from the 772 m elevation was completed to test the down plunge extension of the Falcon Zone. It is interpreted that the Falcon/7 Zone now extends from surface approximately 1,000 m down plunge and is part of the up plunge extension of the 7 Zone currently being mined near the 1,000 m elevation. This is significant, as the extension of this zone is proximal to mine infrastructure and has the potential to be included in future mine production and ultimately augment production rates in the medium term. Additional drilling is required to better define these zones and remains a priority in the second half of 2020.
Kiena	The Preliminary Economic Assessment study was completed in Q2 2020. The PEA demonstrates a low-cost and high margin operation, with low capital requirements and a short payback period, while minimizing risks and maximizing shareholders’ return. This PEA is based on the Mineral Resource Estimate dated September 2019 and includes only those resources proximal to the mine infrastructure, specifically the A Zone, B Zone, S50, VC Zones and the South Zone. An updated resource estimate is planned early in Q4 2020 followed by a pre-feasibility study and a production restart decision in H1 2021. Diamond drilling activities at Kiena restarted on May 11th, 2020 focusing on the continuation of converting inferred into indicated resources. This drilling has continued to confirm the overall continuity of the geometry and the high-grade gold mineralization of the A Zone and identified additional mineralization outside of the most recent resource estimate. The A Zone now extends down plunge in excess of 830 m.

Technical Disclosure

The technical content of this release has been compiled, reviewed and approved by Marc-Andre Pelletier, P. Eng, Chief Operating Officer, and Michael Michaud, P.Geo., Vice President, Exploration of the Company and each a “Qualified Person” as defined in National Instrument 43-101 –Standards of Disclosure for Mineral Projects.

Cautionary Note to United States Investors Concerning Estimates of Reserves and Resources

The mineral reserve and resource estimates reported in this news release were prepared in accordance with National Instrument 43-101 – Standards of Disclosure for Mineral Projects as required by Canadian securities regulatory authorities. The United States Securities and Exchange Commission applies different standards in order to classify and report mineralization. This news release uses the terms “measured”, “indicated” and “inferred” mineral resources, as required by NI 43-101. Readers are advised that although such terms are recognized and required by Canadian securities regulations, the SEC does not recognize such terms. Canadian standards differ significantly from the requirements of the SEC. Readers are cautioned not to assume that any part or all of the mineral deposits in these categories constitute or will ever be converted into mineral reserves. In addition, “inferred” mineral resources have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource exists, is economically or legally mineable or will ever be upgraded to a higher category of mineral resource.

ABOUT WESDOME

Wesdome Gold Mines has had over 30 years of continuous gold mining operations in Canada. The Company is 100% Canadian focused with a pipeline of projects in various stages of development. The Company’s strategy is to build Canada’s next intermediate gold producer, producing 200,000+ ounces from two mines in Ontario and Quebec. The Eagle River Complex in Wawa, Ontario is currently producing gold from two mines, the Eagle River Underground Mine and the Mishi Open pit, from a central mill. Wesdome is actively exploring its brownfields asset, the Kiena Complex in Val d’Or, Quebec. The Kiena Complex is a fully permitted former mine with a 930-metre shaft and 2,000 tonne-per-day mill. The Company has further upside at its Moss Lake gold deposit, located 100 kilometres west of Thunder Bay, Ontario. The Company has approximately 138.9 million shares issued and outstanding and trades on the Toronto Stock Exchange.

Wesdome Gold Mines Ltd.
Summarized Operating and Financial Data
(Unaudited, expressed in thousands of Canadian dollars, except per share and per unit amounts and otherwise indicated)

		Three Months Ended				Six Months Ended
		June 30				June 30
		2020		2019		2020		2019
Operating data
Milling (tonnes)
Eagle River		42,349		28,754		98,223		59,695
Mishi		13,721		18,623		24,768		37,093
Throughput ²		56,070		47,377		122,991		96,788
Head grades (g/t)
Eagle River		18.1		23.4		15.8		20.9
Mishi		2.9		3.0		2.7		2.6
Recovery (%)
Eagle River		97.9		96.4		97.6		96.9
Mishi		79.8		85.2		77.8		83.3
Production (ounces)
Eagle River		24,117		20,873		48,574		38,828
Mishi		1,026		1,564		1,690		2,618
Total gold produced ²		25,142		22,437		50,264		41,446
Total gold sales (ounces)		23,140		24,113		49,640		42,873

Eagle River Complex (per ounce of gold sold) ¹
Average realized price	$	2,365	$	1,752	$	2,257	$	1,743
Cash costs		882		837		1,009		850
Cash margin	$	1,483	$	915	$	1,247	$	893
All-in Sustaining Costs ¹	$	1,218	$	1,220	$	1,327	$	1,260

Average 1 USD → CAD exchange rate		1.3853		1.3377		1.3651		1.3336

Cash costs per ounce of gold sold (*US$*) ¹	$	637	$	626	$	739	$	637
All-in Sustaining Costs (*US$*) ¹	$	879	$	912	$	972	$	945

Financial Data
Mine profit ¹	$	34,304	$	22,055	$	61,923	$	38,314
Net income	$	16,097	$	8,327	$	27,610	$	16,419
Net income adjusted ¹	$	16,473	$	8,327	$	27,986	$	14,050
Operating cash flow	$	30,246	$	15,400	$	63,675	$	27,981
Free cash flow (outflow) ¹	$	17,691	$	1,155	$	34,363	$	726
Per share data
Net income	$	0.12	$	0.06	$	0.20	$	0.12
Adjusted net earnings ¹	$	0.12	$	0.06	$	0.20	$	0.10
Operating cash flow ¹	$	0.22	$	0.11	$	0.46	$	0.21
Free cash flow ¹	$	0.13	$	0.01	$	0.25	$	0.01

Wesdome Gold Mines Ltd.
Condensed Interim Consolidated Statements of Financial Position
(Unaudited, expressed in thousands of Canadian dollars)

	June 30, 2020		December 31, 2019
Assets
Current
Cash and cash equivalents	$	66,733	$	35,657
Receivables and prepaids		1,798		1,996
Sales tax receivable		3,256		3,344
Inventories		10,517		19,667
Total current assets		82,304		60,664

Restricted cash		657		657
Deferred financing cost		1,025		988
Mineral properties, plant and equipment		121,142		116,765
Exploration properties		121,756		106,644
Total assets	$	326,884	$	285,718

Liabilities
Current
Borrowings	$	–	$	3,636
Payables and accruals		18,077		19,219
Income and mining tax payable		4,137		1,419
Current portion of lease liabilities		5,133		3,781
Total current liabilities		27,347		28,055

Lease liabilities		6,287		5,889
Deferred income and mining tax liabilities		33,723		23,829
Decommissioning provisions		21,889		21,443
Total liabilities		89,246		79,216

Equity
Equity attributable to owners of the Company
Capital stock		177,973		174,789
Contributed surplus		5,932		5,590
Retained earnings		53,733		26,123
Total equity attributable to owners of the Company		237,638		206,502
Total liabilities and equity	$	326,884	$	285,718

Wesdome Gold Mines Ltd.
Condensed Interim Consolidated Statements of Income and Comprehensive Income
(Unaudited, expressed in thousands of Canadian dollars except for per share amounts)

	Three Months Ended						Six Months Ended
	June 30						June 30
		2019			2018			2019			2018

Revenues	$	54,772		$	42,276		$	112,104		$	74,811
Cost of sales		(26,270	)		(26,571	)		(63,860	)		(46,756	)
Gross profit		28,502			15,705			48,244			28,055

Other expenses
Corporate and general		1,805			1,498			3,776			3,506
Stock-based compensation		1,340			1,056			1,744			2,155

		3,145			2,554			5,520			5,661

Operating income		25,357			13,151			42,724			22,394

Quebec exploration credits refund		–			–			–			2,867
COVID-19 costs		(556	)		–			(556	)		–
Interest expense		(284	)		(114	)		(539	)		(226	)
Accretion of decommissioning provisions		(52	)		(122	)		(177	)		(237	)
Interest and other income		(204	)		31			91			325
Income before income and mining taxes		24,261			12,946			41,543			25,123

Income and mining tax expense
Current		1,769			1,175			4,039			2,143
Deferred		6,395			3,444			9,894			6,561
		8,164			4,619			13,933			8,704

Net income and total
comprehensive income	$	16,097		$	8,327		$	27,610		$	16,419

Earnings per share
Basic	$	0.12		$	0.06		$	0.20		$	0.12
Diluted		0.11		$	0.06			0.19		$	0.12

Weighted average number of common
shares (000s)
Basic		138,918			136,740			138,691			136,266
Diluted		142,430			139,661			142,227			139,492

Wesdome Gold Mines Ltd.
Condensed Interim Consolidated Statements of Changes in Equity
(Unaudited, expressed in thousands of Canadian dollars)

Retained

Capital

Contributed

Earnings/

Total

Stock

Surplus

(Deficit)

Equity

Balance, December 31, 2018

166,387

5,777

(14,955

)

157,209

Net income for the period ended

June 30, 2019

–

16,419

Exercise of options

2,691

–

2,691

Value attributed to options exercised

1,307

(1,307

)

–

Value attributed to options expired

–

(91

)

–

Value attributed to RSUs exercised

253

(253

)

–

Value attributed to DSUs exercised

175

(175

)

–

Stock-based compensation

–

2,155

–

2,155

Balance, June 30, 2019

170,813

6,106

1,555

178,474

Balance, December 31, 2019

174,789

5,590

26,123

206,502

Net income for the period ended

June 30, 2020

–

27,610

Exercise of options

1,782

–

1,782

Value attributed to options exercised

825

(825

)

–

Value attributed to RSUs exercised

577

(577

)

–

Stock-based compensation

–

1,744

–

1,744

Balance, June 30, 2020

177,973

5,932

53,733

237,638

Wesdome Gold Mines Ltd.
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited, expressed in thousands of Canadian dollars)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
		2020			2019			2020			2019

Operating Activities
Net income	$	16,097		$	8,327		$	27,610		$	16,419
Depreciation and depletion		5,802			6,350			13,679			10,259
Stock-based compensation		1,340			1,056			1,744			2,155
Accretion of decommissioning provisions		52			122			177			237
Deferred income and mining tax expense		6,395			3,444			9,894			6,561
Interest expense		284			114			539			226
Foreign exchange loss on lease financing		(236	)		9			184			9
		29,734			19,422			53,827			35,866
Net changes in non-cash working capital		512			(2,942	)		11,168			(6,805	)
Mining tax paid		–			(1,080	)		(1,320	)		(1,080	)
Net cash from operating activities		30,246			15,400			63,675			27,981

Financing Activities
Exercise of options		1,100			789			1,782			2,691
Amortization of deferred financing cost		3			–			(34	)		–
Repayment of borrowings		–			–			(3,636	)		–
Repayment of lease liabilities		(1,152	)		(1,316	)		(2,209	)		(2,571	)
Interest paid		(284	)		(114	)		(539	)		(226	)
Net cash used in financing activities		(333	)		(641	)		(4,636	)		(106	)

Investing Activities
Additions to mining properties		(5,445	)		(6,804	)		(11,991	)		(13,021	)
Additions to exploration properties		(5,958	)		(5,498	)		(15,112	)		(11,036	)
Funds held against standby letter of credit		–			(627	)		–			(627	)
Net changes in non-cash working capital		(1,175	)		(2,282	)		(860	)		(3,174	)
Net cash used in investing activities		(12,578	)		(15,211	)		(27,963	)		(27,858	)

Increase in cash and cash equivalents		17,335			(452	)		31,076			17
Cash and cash equivalents – beginning of year		49,398			27,847			35,657			27,378
Cash and cash equivalents – end of year	$	66,733		$	27,395		$	66,733		$	27,395

Cash and cash equivalents consist of:
Cash	$	66,733		$	13,395		$	66,733		$	13,395
Term deposits		–			14,000			–			14,000
	$	66,733		$	27,395		$	66,733		$	27,395

Posted August 11, 2020

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